What is churn rate? Formula, definition, and how to reduce churn

Churn, or customer turnover, is a critical business metric that measures the rate at which customers cease doing business with a company within a specific timeframe, often due to dissatisfaction, poor service, or competition. Calculating churn involves dividing the number of lost customers by the total customer base at the period's start, offering insights into company health. While a low churn rate is generally favorable, what constitutes a good rate varies by industry. High churn can negatively impact revenue, growth, and reputation, as it entails losing potential long-term customer value and increasing acquisition costs. Strategies to mitigate churn include enhancing customer experience, offering incentives, providing excellent service, and leveraging data analytics to predict and address churn risks. Successful examples, such as Groove and Proposify, demonstrate the effectiveness of focusing on user experience and customer education in reducing churn. Ultimately, understanding and addressing churn is vital for sustaining business growth and customer retention.